AUTOMATION... THE KEY OF EFFICIENCY

24.04.2016 20:32

In recent years, we have been observing how automation has been introduced into companies in form of computers, machines, and even robots, that are replacing humans in many tasks, and in many cases doing it better and faster than it was done before. We thought that the introduction of new technology was just affecting greatly the big manufacturers, but following a study done by the Oxford university two years ago, we can see that 47% of the companies in the tertiary sector around the world have introduced some elements of automation to their production process in the last five years (up to 2014). Technological development has brought many different advances to the business world, as big data, automat robots or even artificial intelligence, that is able to take managing decisions by itself. There have been many debates about the intervention of the various governments in this development process, but if we see all the technological sector growing at this speed ,it might be because of something, so how efficient is really automation for a standard firm?

The introduction of robots, software and computers into companies in the last years is a fact that has had a tremendous repercussion in the economy, but overall in the labour market, as it has destroyed many employment sin the secondary sector to move them into the services, and make the workers have the need for a higher specialisation and differentiation in the market. Computers used in production nowadays can manage data through patterns and generate codes to organise it in more efficient and faster ways. Artificial intelligence is mainly used in the human resources departments to explore the productivity of each worker and discuss about its salary in balance to the benefits it generates for the firm; this allows firms to increase their human capital and workers to be highly motivated by the incentive of new working schemes. The productivity of machines in contrast to humans is greater in most of the cases, as we can imagine that for example machines don't need rest breaks or lunch pauses each day, producing higher levels of output. The production line also becomes much more flexible in terms of rotation, as workers can get ill and have to be replaced, and with technology, the entrepreneur assures that the production process is always covered fully. Machines also have great effects on social benefits, as there will be higher innovation in the market if the technological sector rises, followed by the creation of more developed goods and services, generating fierce competition and making firms reduce their prices and offer a wider range of products, which overall will increase the living standards of the population.

In first place, automation will help firms to stay competitive in the new technological markets, as old companies that don't renovate their production methods will have higher costs and stay obsolete, so technology will help firms to leverage more margin in their production. In contrast to human workers, the introduction of new machinery will reduce the errors in the production line, as machines will be much more specialized and precise. This will make the production speed increase, as it will enable more units of output to be produced in a smaller period of time, which will increase supply in an enormous way, supposedly having positive effects on profit. The reinvestment of profits into new machinery products will make the output be multiplied generating higher income levels in the mean term, and helping to build up the volume and size of the company, because, remember that the increase of automation will also be taken into account of a firm's total capital. By removing the human element from many manufacturing processes, we will be able to increase compliance through a reduction of waste and externalities, as for example pollution... Automation will bring the possibility to the major part of the companies to increase their capabilities, as it will optimise the working methods and increase capacity, resulting in an increased revenue in the mean-long term. Overall, technological equipment will bring a rise of productivity, as the more automation a firm employs the more output per unit of input it will develop, and employing less time in the production, which will improve business operations.

IN THIS GRAPH WE CAN OBSERVE HOW AUTOMATION HAS BROUGHT HIGHER PRODUCTIVITY IN MANY COUNTRIES:

Many people that are against the use of automation in production argue that this will destroy many jobs and create unemployment, but this is not true at all. Workers will need to be upgraded and acquire new working skills to be able to stand still in front of the new automation stampede. New kind of jobs will be developed with the arrival of technology, and industries will be in need of another type of resources, for which employment will be created. Low skilled workers will be the most vulnerable ones to this renovation, but governments all around the world could help by increasing the expenditure in training and education for technology, which needs to be seen more as an investment, as it will produce large economic growth in the future, and it has shown to be a sustainable and renewable market. Many job opportunities will emerge from the development of technology, but the issue is that this time, humans are the ones in need of adaptation to automation. This adapting process has been shown in the last decades through de-industrialisation, which has caused the fall of the secondary sector in many countries in contrast to the up rise of the tertiary, where the workers have been positioned after having acquired new skills.

WE CAN OBSERVE A GRAPH THAT REPRESENTS THE DE-INDUSTRIALISATION PROCESS IN THE LAST DECADES:

In conclusion, as we have seen, the rise in automation will automatically provoke deindustrialisation. But we don't have to see deindustrialisation from the bad side; totally at contrary, as it is the sign of the development of a nation, and an increase of its economic growth caused by a greater efficiency. This process will bring higher salaries, as according to the mean data, the tertiary sector workers are normally better paid than in manufacturing. If the population has higher disposable income, this will allow them to increase their consume on local products, making internal demand rise. One of the principal signs of deindustrialisation is the shift in the demand of standard consumers towards professional services, which implies that the people prefer to spend the major part of their wages on finance, lawyers, doctors, education... instead of necessities, which demonstrates economic sufficiency. All this factors will generate a higher GDP, which as a sign of higher efficiency and more productivity, that will allow governments to reduce taxes or otherwise offer better public services to their citizens. As John Maynard Keynes said: "The difficulty lies not so much in developing new ideas as in escaping from old ones."